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Do NBC Universal, Fox and Disney Need to Rethink Their Hulu Strategy?

Viewpoint: Optimedia's CEO Antony Young

I first met Jason Kilar at a Tribeca lunch spot last June, and it wasn't hard to be impressed by his impassioned mission to insert Hulu into a special place in the media ecology. He seemed to possess unbridled enthusiasm and the entrepreneurial acumen to master the technology, package a smart sell and navigate a potentially challenging shareholder structure.

Fame and success predictably followed. In just two years Hulu has gained some 38 million viewers and usurped all other online-video destinations -- with only the ubiquitous YouTube in front of it. It provides a wonderful user experience, an understandable revenue model and a compelling proposition for most advertisers, whether you play in the digital or traditional broadcast space.

Fast Company this month ran a piece posing the question "Can Jason Kilar and his hit site Hulu save traditional TV from itself?" What it should have asked is "Will Jason Kilar and Hulu be responsible for killing traditional TV?" Hulu is the TV industry's potential H-bomb. And what puzzles me, is that it is precisely the major national broadcast executives of the likes of NBC Universal, Fox and Disney who have their fingers resting on the trigger.

I'm actually a big fan of Jason's, and believe what he's been able to achieve in such a short time at the helm of Hulu to be phenomenal. But I question the wisdom of the network's strategy behind Hulu ... it just doesn't make any sense from a business perspective. Let me address some of the premises behind their support for this joint venture.

'We have to do this, otherwise others will'
Wrong. "Others" don't have the desirable, premium content that these networks own. These days, it is the networks that have the technological and legal means to largely control where and how an episode such as "Lost" can be viewed. However, Hulu is training the viewer to time shift out of prime-time. And this is eating away at the very economics that support the investment in creative development and production. Advertising, subscription and home entertainment revenues are the only workable model I can see to fund the cost and quality of TV content, beyond public broadcasting.
'The consumers want it, therefore we better give it to them'
Consumers want a lot of things they can't have. I'd love to have free meals at Denny's every day, or zero delays in and out of JFK, or environmentally friendly gas. But it just doesn't make business or financial sense for companies to provide this. Consumers understand this and they aren't demanding anytime, anywhere access to premium TV at no cost, but if it was offered up then they'd be mugs not to take it. TV should learn its lesson from the publishing industry. Almost every major magazine raced to put their content online, without, in my view, a clear strategy other than, "We need to put our content up there because there's an audience waiting." That ill-informed logic has ripped the heart out of the print business, in which there seems to be no way back.
'Hulu is helping to increase TV audiences'
As a person that follows the ratings fairly closely, I can see no data that conclusively supports this. CBS continues to be the strongest Nielsen-rated network without the assistance of Hulu. Many of the premium cable channels that limit their content online are showing solid audience gains. I can see the sense in supporting selected catch-up episodes for program series, but the breadth and next-day access to prime-time shows, quite frankly, seems to be an incentive for smaller audiences. There's no evidence that newspaper websites are doing anything but eroding newspaper print circulations.

So here's the rub.

As a media buyer, I have no vested interest in whether the broadcaster shareholders support Hulu or not. Our livelihood as an agency relies neither on supporting the status quo of traditional media nor blindly pushing the popular wisdom of digital everything. Optimedia as an agency has shifted decent budgets into Hulu this past year and we will continue to support this media company with advertising dollars as it grows audience and influence.

But in putting on my business-consultant hat for a moment, my advice to Jeff Zucker, Peter Rice and Bob Iger is: you need to reevaluate your Hulu strategy. Commercial TV still has plenty of life in it yet. So let it live. And turn off Hulu before it turns you off.

ABOUT THE AUTHOR

Anthony Young is the CEO of Optimedia US, a full-service media planning and buying agency with offices in New York, Dallas, San Francisco, Seattle and Indianapolis.

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Antony Young

Antony Young has worked in New York, London and Hong Kong heading agencies for ZenithOptimedia Worldwide, Mindshare and independent marketing services firm Water Cooler Group. He is author of several books, including "Brand Media Strategy" [Palgrave Macmillan, second edition August 2014].